BY SUZANNE HAZLETT, MBA, CIMA®, CFP®
Prudent investors would be wise not to make investment decisions based on the occupant of the White House or the composition of Congress. The equity market has consistently moved higher over the long term regardless of which party is in power and whether Congress is split or unified.
Fundamentals, such as the underlying strength of the economy, the direction of earnings, monetary policy, and valuations, are far bigger drivers of the equity market than politics. While near-term caution is prudent due to elevated valuations and investor over-optimism, there are five reasons to remain optimistic in the long term.
- Rate cuts in a no-recession environment have been supportive of the equity market
- Corporate fundamentals remain on solid footing with earnings growth estimates of 8-10% in 2025
- Inflation remains between 2–3%
- Investors hold a record amount of cash in liquid money market accounts
- Businesses continue to enact shareholder-friendly actions such as dividends and buybacks
Conservative versus Liberal Leadership
History has shown neither party can claim superior economic or market performance. The stock market has posted positive returns across most administrations, with the rare exceptions of presidencies that ended in deep recessions. According to Bloomberg, L.P., the S&P 500 Stock Index has delivered an average annual return of approximately 10% since it started in 1957 through Democratic and Republican administrations.
Bottom Line
While politics can drive headlines, fundamentals drive the equity market longer term. Regardless of which party occupies the White House, history has shown that the equity market climbs approximately 9% on average in the 12 months following the election. With positive fundamentals such as solid economic and earnings growth, the bull market should continue and drive the equity market higher over the next 12–24 months.
Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. The S&P 500 is one of three major U.S. financial indexes that tracks 500 large U.S. companies spanning all 11 market sectors, including value stocks and growth stocks that account for 80% of domestic equities by market capitalization Past performance does not guarantee future results. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Raymond James does not offer tax advice. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com
